PREFERENCE SHARES IN ITALIAN CORPORATE STRUCTURES: WHAT TAX RULING 90/2026 MEANS FOR INVESTORS

Italian preferred equity has never been more attractive to private equity sponsors and capital providers. But a recent ruling from the Italian Tax Authority (ITA) has raised questions about how non-proportional returns are taxed. On closer inspection, however, the ruling is narrower than it appears. It cannot be read as establishing a general principle and should not affect the dividend qualification of properly structured preference shares. 

Background: Why Italian Preference Shares Matter

Preference shares (also called preferred equity) occupy the space between pure debt and ordinary equity. Compared with senior lending, they offer superior economic terms: priority distribution rights, downside protection through liquidation preferences, and governance or step-in rights that can be triggered by underperformance. These features make them attractive to private equity sponsors, co-investors, and capital providers alike.

Italian corporate law has long permitted preference shares. Articles 2348 and 2350 of the Civil Code allow companies to create distinct share classes with different economic rights, including preferential rights over profits. 

In market practice, investors and issuers generally expect symmetrical tax treatment: if the return is non-deductible for the issuing company (as a dividend), it should be exempt — or substantially exempt — in the investor's hands. In case of Italian issuer, the clearest path to achieving this outcome is to issue genuine shares with special economic rights (azioni con diritti particolari) rather than financial instruments. Where the instrument is a genuine share, returns qualify as dividends under Article 44(1)(e) of Decree 917/1986 by operation of law — even where the amount is calculated by reference to a formula or rate. 

What did Ruling 90/2026 actually say?

In early 2026, the ITA issued Ruling 90/2026 in response to a ruling request from an Italian joint-stock company (referred to as DELTA S.p.A.). In 2025, DELTA's shareholders had amended the articles of association to include a clause allowing the shareholders' meeting to resolve, case-by-case and by unanimous vote, non-proportional profit distributions. One shareholder later invoked this clause to address its own liquidity needs; the others agreed; no repayment obligation was imposed on the favoured shareholder to the others. 

The ITA concluded that the purpose of the distribution (“causa negoziale”) was not simply to divide profits, but to satisfy one shareholder's liquidity emergency and reinforce mutual bonds among shareholders. On this basis, it applied a split tax treatment:

1. The portion corresponding to the favoured shareholder's pro-rata entitlement was treated as a dividend, eligible for the 95% exemption under Article 89 of Decree 917/1986.
2. The excess portion — above the favoured shareholder's proportional share — was treated as fully taxable windfall income (sopravvenienza attiva) under Article 88(3)(b) of Decree 917/1986.

The shareholders who received less than their proportional share were treated as having received only dividends in the amounts actually paid to them. 

Why Ruling 90/2026 should not affect properly structured preference shares

The ITA's interpretation raises a number of objections. Beyond those objections, the ruling's relevance to genuine preference share structures should be in any event limited for the following reasons. 

Objections to the ITA’s interpretation

1. The legal basis is questionable. Article 44(1)(e) of Decree 917/1986 qualifies returns on shares issued by Italian companies as dividends by operation of law. It imposes no condition that distributions be proportional, nor that the shareholders' resolution pursue only a straightforward division of profits. Companies often distribute profits to provide shareholders with liquidity, but there is no rule whereby dividend distributions receive different tax treatment depending on why shareholders decided to make it.

2. The double taxation problem. The 95% dividend exemption under Article 89(2) of Decree 917/1986 exists precisely to prevent corporate profits — already taxed at the distributing company level — from being taxed again in the investor's hands. Denying the exemption at investor level, while refusing any corresponding deduction at issuer level, generates exactly the economic double taxation the exemption was designed to prevent. 

3. This case is meaningfully different from Ruling 50/2025. Ruling 50/2025 was cited in the ruling request as a potential source of uncertainty regarding the tax treatment of non-proportional distributions. Although not expressly mentioned by the ITA, Ruling 50/2025 seems to have somehow influenced the outcome of Ruling 90/2026. In that earlier ruling, the ITA reclassified a payment as fully taxable "other income" because it was grounded in a separate, private agreement between shareholders, entered into before and independently of the share sale. That autonomous contractual obligation — existing outside the corporate framework — gave the ITA a legal hook to recharacterise the payment. In Ruling 90/2026, no such agreement exists. Each shareholder's entitlement arises solely from the shareholders' resolution itself, leaving the ITA without a comparable legal basis for reclassification.

Limited scope of the ruling

1. An atypical clause, not a preference share. DELTA had no distinct share classes and no pre-agreed priority rights. The non-proportional distribution was an ad hoc decision taken on the basis of a bylaw clause allowing case-by-case, unanimous shareholder discretion — a mechanism that does not comply with prevailing Italian corporate law interpretation. Under the prevailing notarial interpretation (massima I.I.30 of the Comitato Triveneto dei Notai), preferential economic rights must be defined upfront and applied consistently to an identifiable class of shares; discretionary clauses of the kind used by DELTA are not permitted. That gap in the legal architecture is what undermined the dividend qualification for tax purposes in the DELTA case. This however has nothing in common with a properly structured Italian preference share.

2. No economic bargain — no parallel with preference shares. The ITA classified the excess payment as a windfall gain (sopravvenienza attiva) under the Italian tax provision covering gratuitous transfers (Article 88(3)(b) of Decree 917/1986) — receipts that enrich the recipient with no economic consideration in return. That classification was appropriate on the DELTA facts: the extra payment had no economic counterpart and was driven solely by one shareholder's liquidity needs. A properly structured preference share presents the opposite picture: the preferred return is not a gift from the other shareholders, but the commercial deal agreed at the time of investment, clearly reflected in the articles of association from day one, in exchange for a different risk/return profile accepted by the preferred investor.

Conclusion and key takeaways for investors

Ruling 90/2026 addresses a specific and unusual fact pattern — an ad hoc, discretionary distribution with no pre-agreed share class and no economic rationale beyond one shareholder's liquidity needs.

Ruling 90/2026 does not establish a general principle and should not affect the dividend qualification of returns on properly structured Italian preference shares. Three reasons support this conclusion:

• Dividend qualification by operation of law. Under Italian tax law, returns paid on shares issued by Italian companies qualify as dividends automatically — regardless of whether distributions are proportional or determined by reference to a formula or rate. No additional conditions apply.
• Corporate law compliance drives tax treatment. Where a preference share is structured in accordance with Italian corporate law and notarial interpretation — with priority economic rights clearly defined upfront and consistently applied to an identifiable share class — that same structure should be respected for tax purposes. A weakness in the DELTA case was the absence of compliance with prevailing corporate interpretation.
• A commercial deal, not a gift. The preferred return paid on a standard preference share should be respected as a dividend — it is the return agreed at the time of investment in exchange for accepting a different risk profile. It is not a gratuitous transfer from one shareholder to another. 

If you would like to discuss how these developments may affect your investment structures in Italy, please contact the author. We would be happy to help.